Chairman Jeb Hensarling

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One of the priorities of Rep. Jeb Hensarling, Chairman of the House Financial Services Committee, is to end the conservatorship of Fannie Mae and Freddie Mac and let the private sector take the primary role in operating the residential mortgage industry. No other country in the world has the equivalent of the hybrid government/private-sector model of Fannie and Freddie, which has already cost taxpayers more than $150 billion.

On March 13th, the Commerce Department announced a 1.1 percent increase in food and services retail sales, doubling a prior Dow Jones survey of economists that forecast an increase of just 0.6 percent. This new data has led to a fresh wave of enthusiastic commentaries that the U.S. economy is set for a strong recovery. Less examined were the underlying factors that supported the increase.

Which country will serve as the trigger for the next financial crisis? Given the continuing rise in debt-to-gross domestic product (GDP) ratios in many countries, it is apparent that a new financial crisis will occur. Most of the speculation has been about when, rather than where. The most likely candidates are heavily indebted countries with a large growth deficit. The growth deficit is the difference between expected GDP growth and the expected government spending deficit as a percentage of GDP.

Politicians today face many challenges that are unrewarding to tackle, so no wonder many prefer to fulminate about too big to fail. Too big to fail, or TBTF, is a problem about which it is safe to fulminate, since neither politicians nor the public understand anything about it, and even less what to do about it.

To most of the world, the banking crisis that broke out in Cyprus in mid-March was as abrupt and unexpected as an outbreak of Ebola. For Cypriots, it wasn’t sudden at all. Many opportunities to steer the country in a better direction came along over the years but were missed or never tried. Now the misbegotten decision by European finance ministers to tax the accounts of ordinary depositors to help pay for a bailout of the country’s biggest banks has become a source of continentwide embarrassment.

The Dodd–Frank financial regulation statute requires nearly 400 rulemakings. As of January 2, some 60 percent of the rulemaking deadlines were missed, and a full third of the required regulations have not been proposed. The delays may defer some compliance expenses. However, regulatory uncertainty also imposes costs on businesses as well as consumers, as the saga of the “remittance” rules illustrates.